A2 - Engagement Quality & Acceptance, Planning, and Internal Control

Question 1

Would board meeting minutes be included in the permanent audit file (for long term use) or the current file?

Answer 1

Board meeting minutes would be included in the permanent file.

Question 2

Is an auditor obligated to provide a client’s audit documentation to the auditor’s attorney even WITHOUT the client’s permission if the client sues the auditor?

Answer 2

Yes. In this circumstance, the auditor can provide the third party (auditor’s attorney) the audit document even without the client’s permission.

Question 3

Is the number of years’ experience of a predecessor auditor relevant to the successor auditor in planning an engagement?

Answer 3

No.

Question 4

Is information from a predecessor auditor regarding recent trends in an industry relevant when the successor auditor is planning an engagement.

Answer 4

Yes. It should be considered by the successor auditor after accepting the engagement as part of audit planning.

Question 5

In regard to COSO, which internal control component is appropriate when incorporating new things into the business (such as new accounting principles, new personnel, new technology, corporate restructuring, etc.)?

Answer 5

Risk assessment is the appropriate internal control component when assessing the incorporation of anything new.

Question 6

When fraud is discovered, is it necessary for the auditor to communicate the fraud to the senior partner at the CPA firm?

Answer 6

No. When fraud is discovered, it should be reported to:

1) An appropriate level of management at least one level above those involved (if immaterial)
2) Senior management and those charged with governance if the fraud results in a material misstatement and/or if the fraud is a result of a significant deficiency in control.

Note: The auditor should report directly to those charged with governance (bypassing senior management) if the fraud involves senior management.